By Jackson Reese
Monday, April 18, 2022
They clearly weren’t prepared for the bitter cold of
late March in Washington, D.C., but the California businessmen and women
standing on the marble steps of the Supreme Court seemed positively thrilled
to be there.
Inside, attorneys delivered their oral arguments in Viking
River Cruises, Inc. v. Moriana. The issue: a California supreme court
decision called Iskanian and a unique law called the Private
Attorneys General Act (PAGA). Attorneys for the Viking River Cruises say that
the California court’s Iskanian decision violates their
federal right to bring employee grievances to an arbitrator. Attorneys
representing plaintiff Angie Moriana would prefer to use PAGA to address such
grievances, which might create a windfall for the State of California and the
plaintiff’s attorneys.
While the arguments were heard in the courtroom,
businessmen and women from California hoisted signs and shouted that classic of
picketers everywhere, “Hey! Hey! Ho! Ho!
This PAGA Law Has Got to Go!”
Many Americans have only recently been introduced to
PAGA-styled laws because of its application in Texas’s Heartbeat Act, which
similarly allows citizens and attorneys to bring suit against those assisting
with abortion. Feigning shock, California governor Gavin Newsom has proposed
using the same tactic to target guns.
“We’re going to start playing by their rules now,” Newsom
said during a February news conference. “If Texas can use a law to ban a
woman’s right to choose and to put her health at risk, we will use that same
law to save lives and improve the health and safety of the people in the state
of California.”
It was all theater. California has been using precisely
that strategy for decades to go after those who violate pet state regulations.
Through PAGA, California has deputized aggrieved
employees and their attorneys to sue small businesses on behalf of the state
for even the most minuscule violation of California labor law. A typo on a pay
stub, unstructured breaks, or miscalculated overtime could result in a
million-dollar infraction for your local diner, muffler shop, or salon. And the
possibilities for private attorneys are endless: California’s sprawling
1,100-page labor code is too vast and bloated for state attorneys to enforce on
their own. As a consequence, the state outsources to — some might say
incentivizes — private attorneys to sue on behalf of the State of California.
The worst part: PAGA lowers the litigation bar so
dramatically that even a new employee can demand fees on behalf of every
employee within a firm, even if they aren’t affected by the code infraction.
Consider the story of Blaine Eastcott. After graduating
from college, Eastcott worked at Rockreation, a climbing-gym franchise, in
Southern California. Over the course of 13 years, he earned enough to buy the
company from its owner. He was almost immediately thanked for his hard work by
a PAGA suit. His sin: allowing employees the flexibility to take their breaks
whenever they wanted — a violation of the California labor code. Even more
ridiculous, the aggrieved employee had worked at Rockreation for just two
months but demanded $3.3 million under PAGA — more than Blaine’s gym earns in
two years.
Blaine settled out of court but even that cost him
hundreds of thousands of dollars. “The worst part,” he said, “is that PAGA law
hurts other employees. That money was set aside for raises, upgrades to the
facilities and bonuses for the rest of staff. Now it’s all gone.”
California Democrats marketed the Private Attorneys
General Act as a law built to protect workers. In fact, it does the opposite.
Workers who sue their employers owe 75 percent of the PAGA penalties to the
state with the remainder divided among the attorneys and their clients —
according to a formula crafted by the state attorney general.
In one of the more classic cases, a California judge in
2018 approved a $7.75
million settlement between PAGA attorneys and Uber. The dollars
involved are eye-popping but the division of spoils is not: The state took $3.6
million and attorneys earned $2.3 million. For their injuries, drivers received
$1.08 each.
Bruce Wick, the risk manager of the Housing Contractors
of California, a trade association, says that PAGA attorneys have encouraged
employees to file PAGA claims rather than class-action cases because the burden
of proving a grievance is so low.
“One employee worked for a member of mine for only two
hours, and still filed a PAGA claim,” Wick said. “He hadn’t even qualified for
a break, yet he qualified to sue on behalf of the rest of the employees.”
Wick sits on the board of the California Business and
Industrial Alliance (CABIA), which recently catapulted to the forefront of conversations
surrounding California labor reforms.
“The real problem is that the penalty never fits the
crime,” said Tom Manzo, who founded CABIA three years ago. “Three million
dollars for a flexible work schedule? For a typo on a pay stub? These attorneys
don’t care that they are hurting businesses. And no one is safe. They are even
going after social non-profits.”
Now the case is in the hands of the justices, who will
publish their decision this summer.
“Several of the justices said little or nothing of
substance in the argument, so there is room for doubt about how the case
ultimately will be resolved,” wrote Ronald Mann at SCOTUSblog, shortly after
the Court heard oral argument. “But the tenor of what was said, together with
the historical backdrop of the Supreme Court’s repeated rejection of California
intrusions on the Federal Arbitration Act, presages a strong majority to
validate the Viking River agreement.”
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